Implementation Agreement to Implement a Credit Scheme for Farmers and Workers in the Agriculture Sector in Lebanon

Description

1. Overview

Following October 17th  2019, Lebanon has plunged into a deep political and financial crisis coupled by thousands of people in the streets protesting the poor economic conditions and pervasive corruption, which was further exacerbated following the Beirut blast. Poverty levels have steeply increased amongst both Lebanese citizens and refugees, alongside an overall increase in vulnerabilities both in terms of income and other social indicators. An ESCWA study highlighted that income poverty went up from 25 per cent of the population in 2019, to 55 per cent in 2020, and almost 74 per cent in 2021 . Multidimensional poverty rate in Lebanon doubled from 42 per cent in 2019 to 82 per cent of the total population in 2021.

This came after several years of slow economic growth and mounting debt to finance the commercial and fiscal deficits. Trust has become extremely low in the banking industry, and perhaps more broadly in the financial sector, leading to a run on banks, itself compounded by poor communication on the one hand, and by informal capital controls and limits on cash withdrawals on the other hand.

In a highly dollarized economy, interest rates have spiked (the Central Bank intervened to cap it), the Lebanese pound has lost more than 95% of its value on the parallel market over the past three years, and foreign reserves are dwindling, putting inflationary pressure and posing serious risks on essential goods and services in-country. The private sector is severely hit, with recent reports estimating the number of jobs lost in the private sector at 160,000 as of the end of 2020.

This deepening crisis has dramatically impacted the society and the entire microfinance sector whose aspirational inclusive strategies require support more than ever.

Historically, Lebanon had a stable and growing microfinance industry with an annual portfolio increase of 13% on the client side and circa 20% in outstanding portfolio. It counted a dozen of institutions, legally formed as NBFIs, NGOs, or cooperatives. The sector catered to a significant portion of the low-income population, including refugees. Concretized with an outreach to 170,000 clients by the end of 2018, the microfinance sector hereby directly and indirectly impacted over 760,000 people or around 17% of the Lebanese population mostly vulnerable low income

The crisis hit the sector badly. From October 2019 till the end of 2021, the sector has been steadily shrinking reaching around 50,000 active clients, featuring a significant decrease in the number of clients translated by more than 70% portfolio decline and an increased sector double digit Portfolio at Risk (PAR), in parallel, outstanding portfolio value been depreciating massively (losing 25% if its value annually) due to the high LBP currency inflation rates. Other repercussions include currency mismatches between assets and liabilities causing huge foreign exchange losses. Three main MFIs remained active with different configurations and few managed to resume lending to selected customers in foreign currency. The majority of small MFIs though have paused lending temporarily.

The microfinance sector should be supported and stood by as it will accompany small farmers and microentrepreneurs to get back on their feet while the economy is recovering.  It is through this rationale that the ILO is aiming at supporting one MFI by transferring capital funds to help it support refugees and hosts farmers and small entrepreneurs.

2. Scope of Work

The ILO is looking for a microfinance institution, that has an NGO legal form,  to undertake the following tasks:

• Review the findings of the Markets Systems Analysis and the work done under AIMS in the horticulture sector and undertake a broader market research in the agriculture sector in the selected governorates to understand the needs of the target group and design appropriate financial products that meets those needs.
• Leverage the allocated funds
• Promote the loan product, receive applications, and filter/appraise the applicants 
• Utilize the fund (min of 800K) to exclusively disburse loans for eligible clients in the agriculture sector in line with the agreed parameters
• Follow-up, documentation, M&E and reporting

3. Eligibility

A prerequisite for selection: MFI that is able to provide a contribution that matches at least 30% of ILO’s grant earmarked for the loans

The below are the eligibility criteria for implementing partners interested in participating in the proposed RFP: 

• Microfinance Institutions (MFI) registered as non-profit organizations (NGO) operating in Lebanon
• Well established MFI in Lebanon with a history of client portfolio of more than 10,000 clients by the end of 2019.
• MFI with presence (physical branches and/or staff fully operating) in Akkar, North Lebanon, Beqaa and Baalebek-Hermel.
• MFI that has been disbursing loans in USD in the past year.

Most Economic Advantageous Tender (MEAT) – 70/30% - will be used for this procurement exercise and Contract will be awarded to highest scorer(s) in Cumulative analysis considering Technical and Financial Evaluation

For Interested partners, please refer to the attached TOR for further elaboration onto the composition of the Technical and Financial Proposals.

Clarifications questions, if any, related to this TOR, must be submitted via email by 21 October 2022 to:

1. Mr. Nassim Njeim, PROPSECTS National Officer njeim@ilo.org
2. Mrs. Lara Al Hajj – Administrative and Finance officer – alhajj@ilo.org 

ILO response to clarification question shall be posted on ILO’s website by 24 October 2022.

Narrative/Financial Proposal receipt deadline: 28 October 2022, 11:00 PM, Beirut time

Proposals to be submitted by email and shall be valid for 90 days.